Appeals court strikes potentially dire blow to ObamaCare

A federal appeals court on Tuesday dealt a major blow to ObamaCare, ruling that tax subsidies crucial to the law's functionality may be null in more than half the states.

The 2-1 decision, which could have drastic ramifications for the health care law, rests entirely on a snippet of poorly-worded language in the original bill. The law gave states a choice between setting up their own health care exchanges where residents could buy insurance, or having the federal government run exchanges for them. But the law guaranteed subsidies for buying coverage only "through an Exchange established by the State." Given that, the court ruled that the feds can't subsidize coverage for people who purchase insurance through federally-run exchanges.

Thirty-four states, most of them dominated by GOP governors or legislatures, declined to set up their own exchanges.

"We reach this conclusion, frankly, with reluctance," the D.C. Circuit Court of Appeals wrote. "At least until states that wish to can set up Exchanges, our ruling will likely have significant consequences both for the millions of individuals receiving tax credits through federal Exchanges and for health insurance markets more broadly. But, high as those stakes are, the principle of legislative supremacy that guides us is higher still."

The subsidies are intended to make insurance affordable to millions of low-income Americans; nixing the subsidies could affect more than 7.3 million people, according to one recent analysis. The law's success relies on broadening the pool of insured adults to spread costs and risks, so anything that rolls back enrollments — as the ruling very well could do — could undermine the law entirely.

The federal government can appeal the ruling to the full D.C. Circuit Court.